Published On: Wed, Apr 15th, 2015

Caribbean and Latin America improve environment for infrastructure investment PPPs

Inter-American_Development_BankPUNTA DEL ESTE, Uruguay -- The climate for private investment in infrastructure through public-private partnerships (PPPs) has improved in the Caribbean and Latin America in the last few years, with Chile, Brazil, Peru, Mexico, and Colombia topping the list of the most welcoming countries for PPPs in the region, according to the 2014 Infrascope report.

2014 Infrascope: Evaluating the Environment for Public-Private Partnerships in Latin America and the Caribbean was produced by the Economist Intelligence Unit and commissioned by the Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group. The biannual report measures the ability of 19 countries to mobilize private investment in infrastructure through PPPs. It was launched today at the MIF’s PPPAmericas Conference.

“PPPs promise prosperity for the region as they combine private management and financing of infrastructure with its development as a public good,” said MIF acting general manager Fernando Jimenez-Ontiveros. “It is healthy that that the public and private sectors share risks and responsibilities.”

The Caribbean and Latin America still face a deficit in infrastructure investment. While the region needs to invest some 5 percent of its GDP in infrastructure to close its infrastructure gap, it invested only between 2 percent and 3 percent of GDP in infrastructure development in the previous decade, according to IDB estimates included in the 2014 Infrascope.

The report notes that the regional climate for private investment in infrastructure has strengthened over time and that the overall environment for PPPs has improved since 2012, when the last Infrascope was released. This is because many countries have updated their PPP and concessions laws, and set up new government agencies or specialized units within existing government institutions that structure PPPs.

Jamaica, Paraguay, and Ecuador demonstrated the biggest improvements, increasing their ranking since 2012. Chile continued to lead in PPP readiness and capacity, being at or near the top in all categories. It ranked first in the investment climate category, while Uruguay ranked second. Brazil and Mexico lead the region in PPP subnational activity (at the regional and local level).

On the negative side, 2014 Infrascope notes that financial facilities that support PPPs experienced the slowest rate of progress, making it difficult for PPPs to find financing options. As a result, the report notes, local capital markets and financial facilities for private investment must be developed, and governments should streamline their operations to make them more efficient, while at the same time improving public finances and their management oversight of PPPs.

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